Wrap Text
Unaudited Condensed Consolidated Interim Results
for the Six Months Ended 31 December 2012
FoneWorx Holdings Limited
Incorporated in the Republic of South Africa
(Registration number 1997/010640/06)
Share code: FWX ISIN: ZAE000086237
(“FoneWorx” or “the Group” or “the Company”)
UNAUDITED CONDENSED CONSOLIDATED INTERIM RESULTS
FOR THE SIX MONTHS ENDED 31 DECEMBER 2012
HIGHLIGHTS
UP
EPS 8.98 cents 14%
Profit before tax R17.2 million 7%
NAV per share 83.9 cents 13.7%
Cash reserves R95.6 million 11.7%
COMMENTARY
The board of directors of FoneWorx (“the Board”) presents the
unaudited condensed consolidated interim results for the six
months ended 31 December 2012 (“the interim period”).
Profit before tax increased by 7% from R16.1 million to R17.2
million. Profit after tax increased by 14% from R10.7 million in
the previous corresponding period to R12.2 million in this
reporting period.
This increase in profitability was achieved through the following:
- A conscious decision taken by management (particularly with
regard to MediaWorx and IDWorx) to re-align the business towards
revenue that was more profitable and required less human
intervention in favour of automated or mechanised delivery
platforms. This decision has reduced turnover and costs in
favour of enhanced profitability and improved cash flow.
- A reduction in staff and other operating costs from R15.5
million to R12.8 million, a 17% reduction in cost.
Group revenue decreased by 9% to R47.9 million from R52.6 million
in the previous period, while gross profit decreased from R31.8
million to R29.9 million, a 6% decrease from the previous period.
However the gross profit percentage increased from 60.5% to 62.5%
The total asset value of the Group increased by 7.6% from R128.6
million to R138.4 million and net asset value per share increased
from 73.8 cents per share to 83.9 cents per share, a 13.7%
increase.
Cash on hand increased by 11.7% when compared to the previous
corresponding period from
R85.6 million to R95.6 million. During the interim period, the
Company declared and paid a dividend of R9.5 million (7 cents per
share) relating to the year ended 30 June 2012, 27.3% up from the
previous dividend of R7.5 million (5.5 cents per share) relating
to the year ended 30 June 2011.
Business Overview
The Group has five brands: MediaWorx (infotainment, digital and
social promotions), BizWorx (business services), IDWorx (identity
storage, management and electronic distribution), DRWorx (disaster
recovery) and CarbonWorx (greenhouse gas evaluation and
afforestation projects).
MediaWorx
This division provides a broad base of clients with tools to
facilitate integrated marketing communication strategies.
Mass markets have become fragmented, and thus impersonal mass
communication, especially media advertising, has become less
effective, whereas targeted one-to-one marketing communications
have become more important. MediaWorx specialises in one-to-one
marketing.
The potential for MediaWorx becomes greater each year as “mobile”
becomes top of mind for many organisations. There is huge
opportunity for MediaWorx to re-shape niche sectors and provide
applications that are integrated into the fabric of business
processes.
MediaWorx assists its clients with “device convergence” to enable
the delivery of information and services to where decisions take
place and commercial transactions occur.
Our clients are changing their business processes to take
advantage of mobile and digital consumer technologies. In addition,
social platforms and mobile logistics are now being implemented
for specific business outcomes and are no longer simply “nice to
haves”.
MediaWorx works closely with advertising agencies, media houses
and brand managers (“clients”) to implement marketing
communication programmes incorporating “push-based” mobile
marketing on behalf of these clients, to send content to defined
subscribers, for example SMS, Picture Messages, Surveys,
Multimedia Messaging or “pull-based” mobile marketing on a
customer request where, for example, a customer requests a mobile
coupon.
MediaWorx has enhanced its mobile marketing communications
strategy to incorporate four primary disciplines:
Advertising Promotions
Web Branded content (entertainment &
(mobile internet) infotainment)
Narrowcast Competitions
(mobile casting) (voting, text2win, USSD)
Physical browsing (barcode/Pins, Other (coupons/vouchers,
NFC) requesting more information)
Direct Marketing CRM
Messaging (SMS, MMS, WAP Push, Customer Services (alerts,
email, USSD, IVR) mobile tickets)
Mobile Commerce (payments,
banking)
Market Research (surveys, polls)
Mobile Community (IM, fan club
solutions)
Prize Fulfillment (Pick-a-winner
& fulfill / logistics)
MediaWorx has built up a large client base of over 100 blue chip
clients and was able to enhance its earnings during the period
under review. USSD applications, particularly for mobile community
services, have become very strong and applications hosted for
clients such as Pep Stores have shown remarkable growth. This
service hosts over 4.2 million unique users and processed over a
billion sessions per month.
MediaWorx continues to strengthen its relationship with 88 mobile
networks in 36 countries in Africa and continues to provide
services to blue chip clients like DSTV for shows like Big Brother
Africa.
We anticipate positive growth for MediaWorx in line with the
growth of mobile digital services.
BizWorx
This division provides a broad range of cloud-based services for
small, medium and micro enterprises (“SMME’s”), larger corporates
and individuals. Services include: Fax2Email, Email2Fax, auto
receptionist, desktop and mobile based bulk SMS applications and
custom designed services to meet our client’s specific
requirements.
During October 2012 we launched a free training facility to train
small businesses on the benefits of some of these services and
trained 87 people in the two months forming part of this review.
This training will continue during 2013 as it provides a formal
methodology to market our services.
Our Email2Fax, which enables faxes to be sent to any destination
worldwide from a desktop, continues to show positive growth month
on month. Our ‘mainstay’ product Fax2Email has over 300,000
subscribers and enables subscribers to receive faxes securely and
digitally. Our Fax2Email premium rated application is operated on
the back of a Telkom agreement which comes up for its third
renewal in March 2013.
BizWorx is currently evaluating the launch of its own IP-based
voice service to selected niche clients in line with our ECS and
ECNS licenses (“ICASA licences”). Non premium rated Fax2Email
services have also been launched in line with these ICASA licences.
BizWorx is anticipated to continue to reflect positive earnings,
albeit at a slower growth rate.
IDWorx
This division provides document storage for “FICA” and “RICA”
applications, together with the storage of important miscellaneous
documents.
Technology has grown in a way that accessing the web from mobile
devices is simple and is similar to operating from a desktop
system.
Moving an online portal/content repository to mobile accessible
webspace enriches business applications. IDWorx has converged
mobile technology with web-based technology to provide an enriched
user experience.
During the period under review IDWorx has re-engineered its
identity access management (“IAM”) service and rebranded this to
“YourIdentity4U”. This service is anticipated to launch in April
2013 and incorporates:
- Document storage (ID, passports, proof of identity)
- Medical records (physical and digital)
- Password storage (encrypted)
- Medical alert service (using USSD for medical care
practitioners)
- General alert service (when in trouble)
- Identity theft restitution service (restore your profile)
- Reminders (for important policies, licences etc expiring)
- Electronic document distribution (push documents via your mobile
device)
This product will be aimed specifically to individuals across the
LSM spectrum and will assist them not only with regulatory
compliance for current legislation (FICA, FAIS and RICA), but also
with anticipated legislation (Protection of Personal Information
Bill). This service is cloud-based and incorporates mobile apps
for all the major handset operating systems. This service enables
subscribers to consolidate important documents, medical records
and the like into a single secure vault and then have the control
to push documents to service providers requiring these documents.
DRWorx
This division provides disaster recovery and workflow continuity
for targeted niche clients such as stockbrokers. DRWorx is an
approved site by JSE Limited (“the JSE”).
CarbonWorx
This division focusses on providing individuals or corporates with
a service to calculate their carbon footprint in line with ISO
14064 standards.
The calculated footprint can be fully or partially offset by
planting trees in one of the afforestation sites managed by
CarbonWorx in association with the Department of Environmental
Affairs and Champions of the Environment Foundation. Seventy six
full-time local residents (Mqanduli, Eastern Cape) are employed in
the area to plant and manage the trees and also to clear alien
species. Two thousand five hundred trees were planted in the
period under review and seven thousand trees were grown in the
nursery managed by CarbonWorx.
The momentum of CarbonWorx will be driven by:
- the principle that governance, strategy and sustainability are
inseparable and fundamental tenets of King III; and
- the development of sustainability as a driver for corporates and
individuals, coupled with the development of environmental
developments.
Prospects
We are optimistic about the next six months to our financial year
end in June 2013.
Our strategy around providing integrated marketing communications
around the four disciplines of advertising, promotions, direct
marketing and CRM as alluded to under MediaWorx will enable the
Group to assist our clients in changing business cultures to align
to the new digital reality.
This strategy will also integrate the services offered by
MediaWorx, BizWorx and CarbonWorx by providing our clients with
converged solutions under one roof.
We believe that we will continue to develop social technologies
and platforms for specific communities using our strong USSD and
Instant Messaging (“IM”) technology which will be integrated into
loyalty programmes, clubs and payment gateways.
We would like to thank our directors, management, employees,
dealers, partners and other stakeholders for their continued
support.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Unaudited as Unaudited as
at 31 at 31 Audited as
December December at 30 June
Growth 2012 R’000 2011 R’000 2012 R’000
ASSETS
Non-current assets 25,627 23,772 24,507
Property, plant
and equipment 16,800 18,278 17,761
Intangible assets 8,827 5,494 6,628
Deferred tax asset - - 118
Current assets 112,802 104,850 116,151
Inventory 391 1,656 557
Current tax
receivable 1,523 1,062 148
Trade and other
receivables 15,268 16,492 17,124
Cash and cash
equivalents 95,620 85,640 98,322
Total assets 138,429 128,622 140,658
EQUITY AND
LIABILITIES
Capital and
reserves 114,042 100,354 112,106
Share capital 136 136 136
Share premium 35,619 36,373 36,373
Accumulated
profits 78,287 63,845 75,597
Non-current
liabilities 8,557 7,582 6,396
Interest bearing
liabilities 7,257 7,333 6,396
Deferred tax
liability 1,300 249 -
Current
liabilities 15,830 20,686 22,156
Trade and other
payables 12,905 15,949 14,802
Provisions 2,878 2,994 5,591
Current tax
payable - - 12
Unclaimed
dividends 47 27 47
Current portion of
non-current
liabilities - 1,716 1,704
Total equity and
liabilities 7.62% 138,429 128,622 140,658
Net asset value
per share (cents) 13.7% 83.9 73.8 82.4
Net tangible asset
value per share
(cents) 11.1% 77.4 69.7 77.6
Number of shares
in issue 136 002 041 136 002 041 136 002 041
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Unaudited as Unaudited as
at 31 at 31 Audited as
December 2012 December 2011 at 30 June
Growth R’000 R’000 2012 R’000
Revenue -9% 47,897 52,561 98,617
Cost of Sales (17,980) (20,776) (35,026)
Gross profit -6% 29,917 31,785 63,591
Other operating
income 30 173 975
Staff costs (7,686) (9,963) (20,584)
Depreciation and
amortisation
expense (2,150) (2,175) (4,253)
Other operating
expenses -8% (5,163) (5,590) (11,130)
Finance costs (294) (390) (763)
Investment
income 2,548 2,264 4,595
Profit before
tax 7% 17,202 16,104 32,431
Income tax
expense (4,992) (5,395) (9,970)
Profit for the
period 14% 12,210 10,709 22,461
Other
comprehensive
income - - -
Total
comprehensive
income for the
period 12,210 10,709 22,461
Total
comprehensive
income
attributable to
the equity
holders of the
parent company 12,210 10,709 22,461
Headline
earnings
reconciliation
Adjustment for:
Net after tax
profit on sale
of property,
plant and
equipment and
shares in
subsidiary - (51) (26)
Headline
earnings 15% 12,210 10,658 22,435
Weighted average
number of shares
in issue 136 002 041 136 002 041 136 002 041
Basic earnings
per share
(cents) 14.10% 8.98 7.87 16.52
Headline
earnings per
share (cents) 14.54% 8.98 7.84 16.50
Diluted earnings
per share
(cents) 14.10% 8.98 7.87 16.52
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Unaudited as Unaudited as
at 31 at 31 Audited as
December 2012 December 2011 at 30 June
Growth R’000 R’000 2012 R’000
Share capital 136 136 136
Balance at
beginning of
period 136 136 136
Share premium 35,619 36,373 36,373
Balance at
beginning of
period 36,373 36,373 36,373
Investment
equity
accounting (754) - -
Accumulated
profits 78,287 63,845 75,597
Balance at
beginning of
period 75,597 60,616 60,616
Total
comprehensive
income for the
period 12,210 10,709 22,461
Dividend paid to
shareholders (9,520) (7,480) (7,480)
114,042 100,354 112,106
Dividend
declared (cents
per share) 27.3% 7.0 5.5 4.5
CONSOLIDATED STATEMENT OF CASH FLOWS
Unaudited as Unaudited as
at 31 at 31 Audited as
December 2012 December 2011 at 30 June
R’000 R’000 2012 R’000
Cash flow from
operating activities 11,803 12,939 29,260
Net cash generated from
operations 14,510 17,128 35,508
Finance costs (294) (390) (764)
Investment income 2,548 2,264 4,595
Normal tax paid (4,961) (6,063) (10,079)
Cash flow from
investing activities (3,388) (1,056) (3,764)
Purchase of intangible
asset - (48) -
Purchase of property,
plant and equipment (428) (1,059) (2,157)
Proceeds on disposal of
property, plant and
equipment - 51 175
Expenditure on product
development (2,960) - (1,782)
Cash flow from
financing activities (1,597) (830) (1,780)
Dividends paid (9,520) (7,480) (7,461)
Net (decrease)/
increase in cash and
cash equivalents (2,702) 3,573 16,255
Cash and cash
equivalents at
beginning of period 98,322 82,067 82,067
Cash and cash
equivalents at end of
period 95,620 85,640 98,322
BASIS OF PREPARATION
The accounting policies applied in the preparation of these
unaudited condensed consolidated interim results, which are based
on reasonable judgements and estimates, are in accordance with
International Financial Reporting Standards and are consistent
with those applied in the annual financial statements for the year
ended 30 June 2012. These unaudited condensed consolidated interim
results as set out in this report have been prepared in terms of
IAS 34 – Interim Financial Reporting, the Companies Act, 2008 (Act
71 of 2008), as amended, SAICA Financial Reporting Guides as
issued by the Accounting Practices Committee, and the Listings
Requirements of the JSE.
These financial statements have been prepared under the
supervision of Mr Pieter Scholtz CA(SA): Financial Director. These
condensed consolidated interim financial results have not been
reviewed or audited by the Company’s auditors.
SEGMENTAL REPORTING
Operating segments are reported in a manner consistent with the
internal reporting provided to the chief operating decision-makers
(“the CODM”). The CODM have been identified as the executive
committee members who make strategic decisions.
The CODM have organised the operations of the Group based on its
brands and this has resulted in the creation of the following
segments:
- BizWorx: the segment focusing on business related products;
- MediaWorx: the segment focusing on information and entertainment
services; and
- Development: consisting of the three brands that are still
within the development and piloting phase, namely CarbonWorx,
DRWorx and IDWorx.
Unaudited as at Unaudited as at Audited as at
31 December 31 December 30 June 2012
2012 R’000 2011 R’000 R’000
Revenue
BizWorx 28,342 32,900 62,765
MediaWorx 19,069 18,592 34,465
Development 486 1,069 1,387
47,897 52,561 98,617
Cost of sales
BizWorx (7,247) (9,988) (16,422)
MediaWorx (10,383) (10,498) (17,645)
Development (350) (290) (959)
(17,980) (20,776) (35,026)
Gross profit
BizWorx 21,095 22,912 46,343
MediaWorx 8,686 8,094 16,820
Development 136 779 428
29,917 31,785 63,591
The accounting policies applied to the operating segments are the
same as those described in the basis of preparation paragraph
above. MediaWorx provides services within South Africa as well as
in 36 African countries (“Africa sales”). Within the period under
review, 4.3% (six months 2011: 4.5%; 12 months 2012: 4.8%) of
MediaWorx’s revenue can be attributed to Africa sales. The company
allocates revenue to each country based on the relevant domicile
of the client. All of the company’s assets are located in South
Africa.
MediaWorx currently generates 45.5% (2011: 40.3%) of its revenue
through two large network service providers and BizWorx generated
94.2% (2011: 96.5%) through one single land line service provider.
The reconciliation of the gross profit to profit before taxation
is provided in the statement of comprehensive income. The CODM
reviews these income and expense items on a group basis and not
per individual segment. All assets and liabilities are reviewed on
a group basis by the CODM.
DIVIDEND POLICY
It is the Board’s policy to pay annual dividends and therefore no
interim dividend has been declared for this interim period.
Dividends paid during the interim period relate to dividends
declared in prior periods. To the extent that the Board is unable
to find appropriate acquisitions for the Group it will consider
paying a special dividend from excess cash resource to
shareholders particularly as the Group is a net cash generator.
SUBSEQUENT EVENTS
The Board is not aware of any material events that have occurred
between the end of the interim period and the date of this report.
DIRECTORATE
There have been no changes in the directorate during the period
under review.
It is with deep regret, sadness and shock that we inform the
market of the untimely passing of Ronald Graver [“Ronnie”] who was
one of the founding shareholders and main board director. Ronnie
passed away from a heart attack on Friday 22nd March 2013. Ronnie
contributed hugely to the growth and success of FoneWorx and will
be missed by all staff and his co-directors. Our sincere
condolences go to his family.
Mr. Graham Groenewaldt was appointed to the Board as an executive
director on 27 March 2013.
For and on behalf of the board
Ashvin Mancha
Chairman
Mark Smith
Chief Executive Officer
Pieter Scholtz
Financial Director
Johannesburg
27 March 2013
Directors:
Ashvin Govan Mancha (B Proc) - Chairman*, Gaurang Mooney (BA)*
(Botswana), Mark Smith (BA LLB) - Chief Executive Officer, Graham
Groenewaldt, Pieter Scholtz (CA (SA)) - Financial Director (*
Independent non-executive)
Website:
www.foneworx.co.za
Company Secretary:
P A Scholtz (CA (SA))
Designated Adviser:
Merchantec Capital
Transfer Secretaries:
Computershare Investor Services Proprietary Limited
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